RSU Taxes: The Double-Counting Trap

Restricted stock units (RSUs) feel like “free money” until you see two tax events: ordinary income at vest (usually on your W-2) and a capital gain or loss when you sell the shares. The double-counting trap is not paying tax twice on the same dollars—it is accidentally reporting gain on shares whose basis already includes vest income you paid tax on in wages.

TL;DR

At vest, the fair market value of shares (minus what you paid, often $0) is usually ordinary wages in W-2 Box 1.
When you sell, your cost basis generally includes that already-taxed value.
1099-B may show $0 or incorrect basis; you adjust on Form 8949.
Reconcile employer statements + broker PDFs before filing.

Event 1: Vest (ordinary income)

Your employer includes RSU income in W-2 wages (often with supplemental withholding). You already paid ordinary income tax and FICA on that amount (subject to caps and rules).

Document proof callout: Find “Release” or “Settlement” statements showing shares withheld for taxes and net shares deposited.

Event 2: Sale (capital gain/loss)

When you sell, proceeds − basis = gain/loss. Basis starts at what you paid for the shares (often $0) plus the ordinary income recognized at vest.

If your 1099-B shows $0 cost basis, you must adjust or you will overpay capital gains tax.

Why people think they are “taxed twice”

They see wage income on the W-2 and capital gain on Schedule D and assume the IRS is taking the same income twice. In a correct return, Schedule D should not tax the vest amount again—only appreciation after vest (or loss).

Worked example (illustrative)

Vest: 100 shares at $50 = $5,000 in W-2 wages.
Sell later at $55 = $5,500 proceeds.
Basis $5,000 → $500 long-term or short-term gain depending on holding period from vest to sale.

FAQ

What if I sold immediately at vest?
Gain/loss may be small (broker fees, slippage), but basis still matters.

Does supplemental withholding cover my tax?
Often partially; check safe harbor for estimated taxes if a huge vest hits.

How to act on this today

Model a sale in our RSU tool, then register to align W-2, equity statements, and 1099-B. Filed? Verify 8949 adjustments.

Educational content only—not individualized tax advice.